The concept of “fractional” services has gained significant traction in the post pandemic work from anywhere world. From marketing teams to CTOs, companies are increasingly leveraging part-time expertise without committing to full-time salaries. MedTech startups possess a unique blend of innovation and regulatory complexity layered on top of a multitude of risks. Untangling the de-risking puzzle and weaving it into your strategic plan and investor story can be the difference between success and hardship. So what role does a Fractional CFO play and when is the right time for an early – mid stage medtech startup to consider bringing one on board?
Let’s start with what a Fractional CFO can bring to the table. A Fractional CFO can provide executive level financial expertise and oversight on a flexible, part-time basis providing enhanced corporate governance, internal controls, cash flow management and business planning where the story is tightly linked to the pro forma financial projections. This can bring credibility and trust to potential investors or partners and add an independent financial observer to the leadership mix. These are foundational elements that resonate with more sophisticated investors who are being asked to invest larger sums of money in even earlier rounds.When selecting a Fractional CFO for a medtech startup, direct and sustained experience in life sciences or medtech industry is paramount. Industry knowledge ensures the CFO understands the unique regulatory, reimbursement, R&D, clinical development and ultimately commercialization challenges. A Fractional CFO should be a business partner to the CEO and leadership team working with each element to make sure their departments are adequately resourced and accounted for in the business plan on an ongoing basis. This requires deep domain expertise within the industry. Look for the following qualities:
1. Strategic mindset – beyond bookkeeping. One of the first questions we ask when a potential client approaches us about Fractional CFO services is what do you think you need. More often then not we hear what amounts to book keeping and back office activities. While Fractional CFO’s can provide these services, this should not be the critical driver for deciding when to onboard a financial partner. There are many entities that can provide basic accounting services to start up companies. 2. Fundraising experience – Another common misconception we get asked a lot is can you raise X amount of money for us. Fractional CFO’s are not investment bankers. Moreover, investors want to hear from the CEO. The CEO needs to be able to tell the story and understand what they are asking for and how they will use it. It’s the CEO’s vision that needs to resonate with potential investors. However, Fractional CFO’s can be a strong partner to the CEO and board for helping to prepare financial models, discussions around valuation and dilution, helping to build out board and SAB and general corporate investor readiness. Working with more than one client, Fractional CFO’s can apply lessons learned and feedback from other clients to help establish best practices for you. 3. Industry knowledge – Medtech and Life Sciences have unique attributes that require specific understanding to be properly accounted for in the financial projections. Lead times for regulatory interactions, the difference between site activation costs and per patient costs in clinical trial budgets, complex reimbursement pathways in the US and globally and the challenges for commercialization across various US and global healthcare systems. A knowledgeable Fractional CFO can help validate your development and commercialization assumptions so that you can withstand investor scrutiny during Due Diligence.Timing is crucial. While some startups wait until fundraising or scaling challenges force a hire, we typically recommend earlier engagement even if the hours are capped low.
Consider onboarding a Fractional CFO when:
• You’re preparing for a seed or Series A round and need investor-ready financials.
• Your revenue, clinical trial costs, or R&D budget complexity outpaces your internal team’s capabilities or expertise to adequately model.
• Strategic decisions—like partnerships, licensing, or capital allocation— can require executive-level financial guidance.
Ask your Fractional CFO to look at proper corporate structure potentially including Founder Friendly changes that can be made to corporate documents and structures that can help you stay involved and retain as much of your company as possible as your company grows. It’s much easier to make these changes before you bring in more sophisticated investors.